Agriculture Reference
In-Depth Information
The foremost important aspect of under-
standing the economic value of soil carbon
hinges on the idea that, with this informa-
tion, society can prioritize to what extent we
are willing to trade off soil carbon for other
goods and services that enhance human
well-being. This is related to the notion of
opportunity costs at both the individual and
the social level. For example, in order to ac-
cumulate soil carbon in agriculture, a farmer
may have to give up a certain amount of
something else; for example, biomass pro-
duction for energy consumption. However,
this may come as a benefit to society; for in-
stance, in terms of reducing carbon emis-
sions and increased carbon stocks (Lal,
2004, 2010; Sanderman and Baldock, 2010;
see also Chapter 31, this volume).
At a social level, in certain circum-
stances, there may be opportunity costs of
accumulating soil carbon, in terms of food
security (Antle and Stoorvogel, 2008). Con-
versely, when society decides to convert nat-
ural ecosystems to agriculture, this results in
the depletion of soil carbon (and terrestrial
carbon more generally) by as much as 60%
in temperate regions and at least 75% in the
tropics (Lal, 2004). This comes at a cost to
society; for instance, by decreasing soil qual-
ity, which translates into reduced land prod-
uctivity, potential impacts on water quality
and increased climate change.
Valuing soil carbon from an eco-
nomic point of view, however, is not
straightforward, since most of the bene-
fits derived from its conservation and
sustainable use are not reflected by mar-
kets. This is mostly because markets only
reveal sufficient information about the
scarcity of a small subset of goods and
services from nature. Most natural re-
sources, ecosystem processes and func-
tional components are not incorporated
in transactions as commodities or ser-
vices, and their economic value is not
reflected by market prices. One overarch-
ing reason is that soil carbon is a public
good, which poses the fundamental limi-
tations of a market system to provide
comprehensive values involved in deci-
sion processes. In this respect, economics
can be helpful to diagnose such a market
failure problem and identify socially op-
timal investments in soil carbon.
The notion of optimality in the alloca-
tion of soil carbon is associated intrinsically
with the notion of externality in economics.
Externalities are non-intentional collateral
effects that an action has on the welfare of
third parties (originally non-target individ-
uals). These could be either positive or nega-
tive. A positive externality or co-beneit, for
instance, may exist if a programme to in-
crease soil carbon sequestration by a target
farmer group by reducing tillage intensity
might also reduce soil erosion, and thus af-
fect other farmers positively. Negative exter-
nalities can also occur, though. For example,
the adoption of reduced tillage might be as-
sociated with increased pesticide use, which
in turn might increase pesticide runoff and
negatively impact the quality of water used
by consumers at large.
The stock-flow natural capital frame-
work (Costanza and Daly, 1992) much popu-
larized by global initiatives such as the
Millennium Ecosystem Assessment (MEA,
2005) can be used in this context. Here, soil
carbon is the natural capital asset (Dominati
et al ., 2010; Robinson et al ., 2013) and the
flow of benefits it creates is the 'interest' on
that capital that society receives. It is akin to
the idea of private investors choosing a
portfolio of capital to manage risky returns.
Society needs to choose the amount of soil
carbon that maintains future flows of bene-
fits by accounting for the opportunity costs
(trade-offs) of doing so. This economic ap-
proach to the value of soil carbon thus is
anthropocentric, to the extent that the ob-
jective is an instrumental one; that is, fulfil
needs or confer satisfaction to humans ei-
ther directly or indirectly. In this way, valu-
ing soil carbon is based on the intensity of
changes in people's preferences with respect
to land-use change and associated changes
in soil carbon.
It follows that, instead of being an in-
herent property of soil carbon, its value is
attributed by people through their will-
ingness to pay for the goods and services
that flow from it, which depends greatly on
the socio-economic context in which valu-
ation takes place - on human preferences,
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